MANAGERIAL ECONOMICS

WHAT IS THE DEFINITION OF ECONOMICS ?

the study of how to use scarce resources to satisfy unlimited human wants

BASIC FUNCTION OF THE ECONOMIC SYSTEM

→ has the factors of production (Land, Labor, Capital, Entrepreneurship)

Households

→ supplied by the households (raw materials)

→ will supply the goods and services to the households,

Producing Units (Firms)

BASIC CONCEPT IN ECONOMIC

___ are tangible

goods

_____ are intangible

services

the act of making goods and services is called ___

production

the act of using goods and services to satisfy wants is called _____

consumption

_______ refers to the limited availability of resources relative unlimited human wants

Scarcity

because of scarcity, we must make _____

Choices

_____ represents the value of the best alternative forgone when making a choice

Opportunity Cost

The three fundamental questions every economy had to answer

✓ What should be produced?
✓ How should goods and services be produced?
✓ For Whom should goods and services be produced?

WHAT IS AN ECONOMIC INCENTIVES?

refers to rewards or penalties created to influence human behavior to produce desired results.

whar are the 4 economic incentives?

• Positive Incentives

• Negative Incentives

• Market-Based Incentives

• Non-Market Incentives

• encourage desired behaviors by offering rewards or benefits

• Positive Incentives

• discourage undesirable behaviors by imposing costs or penalties

Negative Incentives

rely on market mechanisms to achieved desired outcome

Market-Based Incentives

• operate outside traditional market forces, relying on social, moral, or psychological factors to influence behavior

Non-Market Incentives

MACROECONOMIC TOOL (PESTEL)

1. Political (P)

2. Economic (E)

3. Social (S)

4. Technological (T)

5. Environmental (E)

6. Legal (L)

ceteris paribus

all else equal

WHAT IS DEMAND?

the good or service consumers are willing and able to buy at various prices in a given time period

LAW OF DEMAND

When price goes up, quantity demanded falls and vice versa

DETERMINANTS OF DEMAND

• Price of Good or Service

• Buyer's Income

• Price of related goods (substitutes/complements)

• Consumer preferences

• Future expectations

DOWN-SLOPING DEMAND CURVE

• Is a graph that displays the change in demand resulting from a price change

• It is a visual representation of the law of demand

WHAT IS SUPPLY?

The quantity of a good or service producers are willing and able to sell at various prices during a given time period

LAW OF SUPPLY

When price increases, quantity supplied increases, and vice versa

DETERMINANTS OF SUPPLY

• Cost of production

• Technology

• Government policies (taxes, subsidies)

• Expectations of future prices

• Number of Sellers

UPWARD-SLOPING SUPPLY CURVE

• Illustrates the law of supply or how price changes affect the quantity a seller provides

• Usually depicted as an upward-sloping line — as prices increase, sellers are more willing to make more goods and services available